May 16, 2020

Technology transforming finance: the state of play in Africa

James Scott, Chief Digital Off...
5 min
The past few years have seen Africa emerge as a hotspot for innovation in financial ecosystems. For anybody, anywhere, interested in the potential of te...

The past few years have seen Africa emerge as a hotspot for innovation in financial ecosystems. For anybody, anywhere, interested in the potential of technology to transform economic infrastructure globally, Africa is where they will find the future today. In certain locations, the application of modern telecommunications, digital and mobile technologies to everyday life and commerce is exceeding that which can be found in the developed world. 

Some of this change is being forged by uniquely African factors, opportunities and challenges. We are seeing this play out in a number of different ways, from diaspora flows back onto the continent, the proliferation of mobile money and the role that corporates are playing to leveraging digital technologies to improve supply chains and connect with their customers. 

So these are exciting times for Africa indeed,  but the transformation is still very much a work in progress – so what are we currently seeing in terms of activity and focus?

Getting the user experience right

We are seeing good growth in smart phone penetration and with that a big focus on getting the customer experience right. Building and deploying products and services into consumer’s hands with the right kind of experience is a big driver for many of the various players on the continent. The underlying payment rails have evolved rapidly with mobile money and banks modernising some of their payment capabilities, that the consumers are starting to enjoy new and innovative ways of moving funds across the continent. There are a number of fintech’s entering this space, finding parts of the value chain where there are underserved client needs and are building and deploying innovative solutions into these areas. African startups are providing great solutions to real problems and this is a trend we believe will continue to scale. 

Another important trend on the continent is the role aggregators are playing given the fragmentation of services across the continent. There are market nuances, regulatory environments as well as a diverse range of market participants in African markets. Given this diversity we have seen the emergence of some very strong aggregators to start joining up the pieces, particularly in the cross-border space. With mobile money becoming so pervasive, but individual networks being different in complex ways, this aggregation factor is key to making the whole landscape work seamlessly. We’re also starting to see these aggregation mechanisms drive stronger connectivity between the continent itself and the wider global markets.

Digitisation and technical innovation

While the UI layer is the focus of a lot of activity, this is partly due to it representing the lower-hanging fruit. Big shifts in the underlying mechanisms to move money has been much slower, but the promise and maturing of Blockchain technology as well as the continents natural drive to leverage new and modern technologies like mobile, cloud, data and artificial intelligence will mean that this is the next trend to watch.  

We will likely see this play out in a number of areas at it relates to financial services, everything from processing mechanisms, speed of innovation, lower cost infrastructure as well as new ways of moving money and managing identity.. The latter will be a crucial ingredient as Africa’s digital ecosystem matures. A lot of the issues that organisations face moving funds into and around Africa relate to transparency, the difficulty of tracking money and ensuring funds are received by the appropriate beneficiary and used accordingly and the benefits of many of these digital solutions will start to address this. 

Each of the emerging technologies provide the continent with unique opportunities and we are seeing great momentum from some regulators in different markets. Blockchain and the successful pilot of this technology in South Africa, as well as the recent announcement of a regulatory sandbox for Fintech collaboration in South Africa are good examples of many of the participants in the market looking to experiment and support growth of this sector. Big data and the opportunity this provides banks, corporates as well as fintech’s is another area we are seeing great prospects for innovation. 

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All hands on deck

All of these moving parts amount to the creation of a whole new ecosystem – no one single provider or part of the market can square the whole circle. Collaboration and network-forming is the order of the day. While there is understandably a lot of focus on the smaller fintech disruptors, incumbents such as traditional bank and regulator’s are also very keen to get involved. Some of the regulatory shifts in Europe have accelerated open banking and while this is not regulatory driven in Africa, we are seeing many players start to look at opening up API’s which will become a big catalyst for innovation and new business model development. 

Big foreign institutions are also eager to be involved, and not just financial ones – given the centrality of online and mobile to these new systems, big tech companies can also see opportunity. This is an exciting time for the continent and as always Africa has the potential to accelerate its development in this space. 

 

For more information on all topics for FinTech, please take a look at the latest edition of FinTech magazine.

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Jun 10, 2021

FIVE things fintechs must do to keep investors onboard

Fintech
Investment
venturecapital
AI
Brandon Rembe, CPO, Envestnet...
4 min
Fintech innovations drew in first-time investors who reshaped the markets. What new advancements will help them continue their rise?

New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.

Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?

The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.

Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.

Equal access to financial wellness education

Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.

The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.

More personalisation

Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.

For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.

Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.

The rise of AI-Powered Advice

Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?

Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs. 

Focus on financial mental health

New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.

It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.

Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.

Gamification for good

The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.

Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.

Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.

The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.

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